Finansium Newsletter February 2013

February was a month were Japan continued to manipulate the Yen, to keep the value of the currency down, as they did on several occasions during 2012. Historically, China have been a major currency manipulator but over the past few years China has reduced its manipulation to a large extent. But other countries have stepped up in their manipulation - Switzerland was the biggest currency manipulator in 2012.

The world is a closed system and one country’s trade surplus is another country’s trade deficit. We estimate that excessive purchases of foreign currency by governments in recent years have widened the US trade deficit by $200 billion to $500 billion per year, with millions of jobs lost. Prior to the Great Recession, the Federal Reserve was able to offset the job losses by keeping interest rates low and thus encouraging employment in other sectors such as housing. But the Fed is either unable or unwilling to offset the job losses fully now, and unemployment is expected to remain above normal for at least the next coming years. A significant narrowing of the US trade deficit is about the only option left to return the US economy to full employment in the near future. Put in this light, the cost of foreign currency manipulation is clear.

Our systems detect very well when someone/something affects the market, based on movements outside the normal, such as government interventions, rumors and black swans. Often the market quickly goes back to normal, but sometimes it will take weeks or months. In January two of our trading methods, V1 and V3, detected some moves that were not normal. Unfortunately the market didn’t return to normal quick enough and we made a result below 0% for V1 and V3 in January 2013.